Care home inspectors are to be given new powers to monitor financial records
in a bid to prevent increasing numbers of sudden closures that leave elderly
residents with nowhere to live.

The new series of measures has been designed to prevent a repeat of the Southern Cross crisis, which affected 30,000 vulnerable residents when it abruptly collapsed in 2011.

Norman Lamb, the government’s Care and Support Minister, said the Care Quality Commission (CQC) will implement a "tough series of checks" on 50 to 60 of the largest operators, including those which provide care in people's own homes.

The CQC will have power to require regular financial and relevant performance information as well as "sustainability plans".

The move will give "early warnings" if a company is in trouble, Mr Lamb said.

If a provider is deemed to be in trouble, the CQC will have power to commission an independent business review to help it return to financial stability.

Officials said the collapse of Southern Cross had underlined the financial difficulties in the care home sector.

The company was Britain’s biggest care home operator with 750 homes but went bust because of a drop in income and a £250 million rental bill.

Mr Lamb said: "Everyone who receives care and support wants to know they will be protected if the company in charge of their care goes bust.

"The fear and upset that the Southern Cross collapse caused to care home residents and families was unacceptable.

"This early warning system will bring reassurance to people in care and will allow action to be taken to ensure care continues if a provider fails."

David Behan, CQC chief executive, suggested that if a company is in financial difficulty it could be a predictor of poor care.

"Set alongside our plans for the appointment of a Chief Inspector of Social Care and Support, tougher registration requirements on social care providers and the introduction of a new ratings system, these new measures will strengthen our oversight to help ensure that risks to people's care are identified and acted upon as early as possible,” he added.

Around £23 billion is spent every year by public bodies and private individuals looking after older and disabled people.

Under England’s social care system, the Department of Health sets the policy framework but local councils fund many of the services.

In recent years, smaller care home owners have been swallowed up by large companies but these have run into trouble as town halls have frozen their fees and funded fewer residents.

Research suggests that the number of care homes going bust climbed by 12 per cent last year.

Data from accountancy firm Wilkins Kennedy said the number of care home insolvencies rose from 60 in 2011 to 67 in 2012.